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23/05/2012 - Balance of payments: March 2012

Current account balance

In March 2012, the current account balance showed a deficit of €2.1 billion, down by €446 million or 17.3% year-on-year.

The trade deficit fell by €263 million, mainly as a result of a €575 million decrease in the trade deficit excluding oil and ships, as well as a €133 million decline in net payments for purchases of ships, while the net oil import bill rose by €445 million. The trade deficit excluding oil and ships shrank mainly due to the considerably reduced import bill (down by €536 million or 22.7%), whereas the rise in export receipts was very small, €40 million or 3.5%.

The surplus of the services balance increased by €66 million mainly as a result of higher net transport receipts and, secondarily, lower net payments for “other” services. By contrast, the very small surplus of the travel services balance fell considerably year-on-year. In more detail, in comparison with March 2011, travel spending in Greece by non-residents decreased by 11.2%, while travel spending abroad by residents fell by 4.8%. In the same month, non-residents’ arrivals fell by 12.7%, according to data from the Bank of Greece’s border survey. Gross transport receipts (chiefly from merchant shipping) did not change considerably (+1.6%), but the corresponding payments decreased significantly (by 8.1%); as a result, net receipts grew by 13.3%.

The income account deficit increased by €19 million, owing to higher net payments for interest, dividends and profits.

Finally, the current transfers balance showed a small surplus of €5.3 million, compared with a deficit of €131 million in March 2011, reflecting, on the one hand, lower general government net transfer payments (chiefly to the EU) and, on the other hand, the fact that the “other sectors” recorded net transfer receipts of €39 million (mainly emigrants’ remittances), compared with net transfer payments of €14.4 million in March 2011. (It should be recalled that gross current transfers from the EU mainly include receipts from the European Agricultural Guidance and Guarantee Fund (EAGGF), as well as receipts from the European Social Fund, while current transfers to the EU include Greece’s contributions (payments) to the Community Budget.)

In the first quarter of 2012, the current account deficit fell by €2.5 billion or 34.5% year-on-year, to €4.7 billion. This development is attributable to, mainly, a significant decline of €1.5 billion in the non-oil trade deficit and an increase of €498 million in the surplus of the services balance and, secondarily, a rise (of €186 million) in the current transfers surplus and a decrease (of €71 million) in the income account deficit. At the same time, there was also a decline of €189 million in the net oil import bill, which, it should be recalled: (a) as regards January 2012, chiefly reflects base effects, since net payments in January 2011 included increased expenditure concerning also imports of the year 2010 (the relevant payment had been deferred by the importer), and (b) as regards February 2012, is possibly also attributable to a decline in the volume of oil imports. By contrast, in March the net oil import bill almost doubled.

In more detail, the overall trade deficit decreased by €1.7 billion, as a result of a €1 billion (or 29.7%) decline in the trade deficit excluding oil and ships and a €548 million fall in net payments for purchases of ships, whereas the net oil import bill also decreased, as already mentioned. Receipts from exports of goods excluding oil and ships rose by 7.2%, while the corresponding import bill declined at a relatively faster pace (12.1%).

An increase in the surplus of the services balance reflects higher net transport receipts and lower net payments for “other” services and – to a much lesser extent – lower net travel payments. In more detail, travel spending in Greece by non-residents fell markedly (by 15.1%) year-on-year, reflecting also a fall in non-residents’ arrivals at an average annual rate of 11.7% (according to data from the Bank of Greece’s border survey). Moreover, travel spending abroad by residents fell by 19.9%. Over the same period, gross transport receipts (chiefly from merchant shipping) remained almost unchanged (+0.8%), but the corresponding payments decreased by 11.9%; as a result, net receipts rose by €248 million.

The income account deficit decreased by €71 million year-on-year, mainly due to lower net payments for interest, dividends and profits.

Finally, the current transfers balance showed a surplus of €1.4 billion, up by €186 million year-on-year. This development is mainly due to a rise of €116 million in the net current transfer receipts of general government (mainly from the EU), as well as a decline of €70 million in the net transfer payments of the sectors other than general government (mainly emigrants’ remittances).

Capital transfers balance

In March 2012, the capital transfers balance showed a surplus of €32 million, compared with a deficit of €14 million in March 2011, reflecting a rise in net EU capital transfers to general government. (Capital transfers from the EU mainly include receipts from the Structural Funds – except for the European Social Fund – and the Cohesion Fund under the Community Support Framework.)

In the first quarter of 2012, the capital transfers balance showed a surplus of €1 billion, compared with €312 million in the corresponding period of 2011. This mostly reflects a rise in net EU capital transfers to general government.

The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €2.45 billion in the January-March 2012 period, up by €927 million year-on-year, reflecting the above-mentioned positive development in EU capital transfers.

Combined current account and capital transfers balance

In March 2012, the combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) showed a deficit of €2.1 billion, compared with €2.6 billion in March 2011. In the January-March 2012 period, this balance showed a deficit of €3.7 billion, compared with €6.9 billion in the corresponding period of 2011 (down by 46.8%), i.e. it fell at a faster pace than the current account deficit.

Financial account balance

In March 2012, non-residents’ direct investment in Greece showed a net outflow of €63 million, mainly due to negative reinvested earnings (i.e. losses rather than profits in the balance sheets of corporate direct investors in Greece). Residents’ direct investment abroad recorded an increase of €33 million (net outflow), without any remarkable transaction.

Under portfolio investment, a net outflow of €35.5 billion was recorded, reflecting mainly a €24.2 billion decrease in non-residents’ holdings of bonds and Treasury bills issued by residents of Greece (outflow), as well as a €11.3 billion rise in residents’ investment in foreign bonds and Treasury bills (outflow).

Under “other” investment, a net inflow of €37.6 billion was recorded, which is mainly attributable to a net increase (inflow) of €38.5 billion in the outstanding debt of the public and the private sector to non-residents (of which €7.5 billion concern public sector borrowing from the EFSF and the IMF under the support mechanism for the Greek economy and €31.2 billion concern loans from the EFSF for the implementation of the PSI) and a €5.2 billion decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow). These developments were offset by a €6.2 billion decrease in non-residents’ deposit and repo holdings in Greece (outflow).

In the January-March 2012 period, direct investment showed a net outflow of €400 million (compared with a net outflow of €582 million in the corresponding period of 2011). Specifically, non-residents’ direct investment in Greece showed a net outflow of €289 million, while net outflows of residents’ funds for direct investment abroad reached €111 million.

A net outflow of €37.0 billion was observed under portfolio investment (compared with a net outflow of €6.1 billion in the corresponding period of 2011). In more detail, a capital outflow was recorded due to, mainly, a decrease of €25.2 billion in non-residents’ holdings of bonds and Treasury bills issued by residents of Greece as well as an €11.8 billion increase in resident institutional investors’ holdings of foreign bonds and Treasury bills. Secondarily, an outflow was recorded also as a result of a €442 million increase in residents’ holdings of foreign financial derivatives, and also of a €44 million decline in non-residents’ holdings of shares of Greek firms. Residents’ holdings of foreign shares decreased by €429 million (inflow).

Under “other” investment, a net inflow of €42.3 billion was recorded (compared with a net inflow of €13.1 billion in the corresponding quarter of 2011). This is chiefly attributable to a €37.6 billion increase in the net outstanding debt of the public and the private sector to non-residents (inflow) and to a €10.2 billion decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow). In more detail, net general government borrowing came to €38.7 billion and reflects public sector borrowing from the EFSF and the IMF. This development was partly offset by a €5.55 billion decline in non-residents’ holdings of deposits and repos in Greece (outflow).
At end-March 2012, Greece’s reserve assets stood at €5.4 billion. (It should be recalled that, since Greece joined the euro area in January 2001, reserve assets, as defined by the European Central Bank, include only monetary gold, the "reserve position" with the IMF, "Special Drawing Rights", and Bank of Greece claims in foreign currency on residents of non-euro area countries. Excluded are euro-denominated claims on non-euro area residents, claims (in foreign currency and in euro) on euro area residents, and the Bank of Greece share in the capital and reserves of the ECB.)

Note: Balance of payments data for April 2012 will be released on 22 June 2012.

Related link: Balance of payments: March 2012  - Table